"Where were you when the stock market dropped 778 points in one day?" This will probably be one of those questions that are asked of us years from now by future generations.
One of the questions we will still be trying answer ourselves is: Why? Why did congress not pass the bill that would bail out the nation's financial institutions? Why did all this happen? The effects of this are far reaching.
There is no way to sugar coat it.
What we need to think about right now is how we survive.
"Don't panic" is certainly sage advice and I agree.
People understand this advice, but are they are seeing their options for credit drop like flies.
In an effort to not see people wander in the proverbial desert searching for the oasis, I have chosen to write this article.
Larger banks have certainly been using the word "no" a lot lately.
CNN recently published an article title Credit Crunch Hits Small Businesses that states "Around 65% of domestic banks say they have tightened their lending standards for commercial and industrial loans to small firms over the past three months, according to the July 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices".
My usual rebuttal to statements such as is this is: Consumer banks are not dealing with small to medium sized businesses, they are dealing with everyday consumers and those are the standards that they are using to judge people and their businesses; they do not make any delineation between the two.
I stand by this argument more than ever.
The same article goes on to site Bill Dunkelberg who is not only the chairman of a small New Jersey based bank by the name of Liberty Bell Bank, but is also the chief economist for the National Federal of Independent Businesses.
He states that small banks who are dealing with small business are doing fine.
Dunkelberg's reason that the small banks are fairing better is that they are lending to the same people who are making the deposits.
Essentially they are lending to, and investing in their depositing pool.
They do not have a large network to support.
They do not need to be involved in the riskier Wall Street investments.
I have often recommended to clients in our business credit program that they ought to form a relationship with a small local bank.
Smaller banks will take more notice of you than a larger bank; especially banks that you have dealt with for a substantial amount of time.
If you have shown a history of consistent deposits that will go a long way with that bank when you want borrow money.
Herein lays our answer: Build the credit of your business.
Business credit is separate from your personal credit.
This is not to say that having great personal credit cannot help build your business credit; however, having an independent method to help your business flourish amid these uncertain times is something that business owners cannot ignore.
There are several advantages to the business credit system and as consumer credit tightens its regulations you can be sure that there will be even more.
Corporate credit is governed by a system completely separate from the FICO system which regulates consumer credit.
Things like debt to income ration do not even enter into the equation.
That is why you can build separate credit for your business.
Also remember that business credit is still the largest lending source in the world.
What a great system! In some cases it even allows you to use other people's money with no interest.
Instead of having to pay a bill for this or that wholesale item immediately, you have time.
You can use this time to allow yourself to meet payroll expenses, turn a profit, and expand your business.
Businesses that have successfully built their credit are reaping the benefits.
These businesses have opened trade lines with office suppliers, computer companies, etc.
They have gone on to purchase vehicles under the business.
Most importantly, they have been able to secure financing for their business.
This financing has not only ensured their stability but has allowed these businesses to grow solid and strong.